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Binance Faces South Korea Expansion Headwinds Following Hong Kong Challenges

Last Updated April 1, 2024 3:56 PM
Shraddha Sharma
Last Updated April 1, 2024 3:56 PM
By Shraddha Sharma
Verified by Peter Henn

Key Takeaways

  • Binance reportedly seeks to resolve regulatory issues in South Korea through direct talks with financial authorities.
  • Meanwhile, challenges in Hong Kong impacted Binance’s efforts to expand in Asia.
  • Binance claims to be prioritizing compliance, adjusting governance to align with regulatory expectations

Binance’s Asian foothold is weakening and it has reportedly made the latest effort in the South Korean market. The world’s largest crypto exchange initiated proactive dialogue with South Korea’s financial authorities. This move follows challenges encountered in Hong Kong.

Binance’s Engagement in South Korea

Binance CEO Richard Teng reportedly visited South Korea to engage directly with the financial regulators. The visit, reported  by News 1, was to end the deadlock over the Gopax acquisition which was made in 2022.

The FTX fallout at the end of 2022 has also created hurdles for Gopax’s GoFi virtual asset deposit service. This was unable to return money to users while Binance assumed responsibility for the debts.

Post-acquisition, Binance appointed Leon Singh Pung as Gopax CEO and submitted a change report to the Financial Intelligence Unit (FIU). It has made several changes since but FIU has not given a green light to the exchange.

As per the local report, the Financial Intelligence Unit (FIU) of South Korea has delayed accepting Gopax’s business report due to Binance’s judicial risks. Notably, a $4.3 billion fine by the US Department of Justice and the ongoing investigations of the exchange has created hurdles. Meanwhile, its majority shareholder eligibility has led to more scrutiny, in turn blocking its domestic entry.

In response to regulatory pressures, Binance altered its governance structure and reduced its stake in Gopax.  

Compliance as a Priority

With Richard Teng, Binance has stated that it is compliance-focused. The exchange is steering towards direct negotiations with South Korean financial authorities, local reports underline that it has hired government officials to improve Gopax exchange governance.

In his interview  with Nikkei Asia, Richard Teng explained that receiving fines is common in the financial industry, affecting even the most established companies. He highlighted that despite Binance’s regulatory setbacks, the exchange has experienced an increase in funds.

Richard Teng stated his goal to incorporate a culture centered around compliance within Binance’s operations.

The development also comes after a setback in Hong Kong. BX SERVICES LIMITED, an affiliate of Binance, surprisingly pulled back its application for a cryptocurrency exchange license in Hong Kong. Investigations by CCN suggest that the exchange might have ceased its operations, facing an April deadline for withdrawal.

Will Binance Rise Again?

As Binance navigates its regulatory challenges in South Korea, its strategy for penetrating Asian markets is an emphasis on compliance and governance. The approach, following the setback in Hong Kong, could be crucial.

 Richard Teng’s statement signals a new compliance-driven culture after founder Changpeng Zhao stepped down. However, it has to be seen if local regulators will buy the strategic rebranding in domestic markets.

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